Entrepreneurship - Intro to Political Economy, Lecture6

sites.duke.edu/intrope/
COURSE OVERVIEW:
Introduction to Political Economy is a self-contained and nontechnical overview of the intellectual history of political economy, the logic of microeconomics, and the definitions used in macroeconomics. It introduces the notion of a political economy, emphasizing the moral and ethical problems that markets solve, and fail to solve.
LECTURE OVERVIEW:
1. The argument for capitalism and entrepreneurship is not greed, but benefits to consumers. Markets rely on a system called "consumer sovereignty."
2. The story of Soichiro Honda, and his struggles with bureaucracy. Innovation requires many people working on different things, and many failures.
3. Definitions: Opportunity Cost, Rents, Profits, and Rent-Seeking
4. The distinction between profit-seeking and rent-seeking is complicated, but it is socially important. Government has to be careful to restrict rent-seeking opportunities, because private markets can't tell the difference!
5. But the incentives of the state are wrong, and the state often fails. Many states actually specialize in rent-extraction. Examples--"mud farmers" and castles along the Rhine River in Germany, are considered.
6. The key problem: Rent seeking causes a loss of consumer surplus from exchanges that do not take place. Unseen, hard to measure. Foregone improvements in growth, prosperity and use of goods. There is also the dissipation of resources in war over right to charge tolls, so that spawns competition over rights to control access to "overfishing" the resource.
7. A summary: Exchange creates value, New products must pass profit test. But accounting profits are both rents and profits. Problem: rent-seeking destroys value in pursuit of transfers, which are at best neutral. Creating rents is "profitable" for authority that can extract transfers in exchange.
READINGS:
Munger, M.C. “Two Steves and One Soichiro.” (www.econlib.org/library/Column... )
Kirzner, Israel. “Competition, Regulation, and the Market Process: An “Austrian” Perspective” Cato Policy Analysis #18 (www.cato.org/pubs/pas/pa018.html )
Kirzner, Israel, “Creativity and / or Alertness: A Reconsideration • of the Schumpeterian Entrepreneur” Review of Austrian Economics, 1999 11: 5-17. (link.springer.com.proxy.lib.du... )
Folsom, B.W., textbook, Chapters 4-5.
Andreessen, Marc. “Why Software is Eating the World,” August 20, 2011, Wall Street Journal
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Produce by Shaun King, Duke University Department of Political Science Multimedia Specialist

[@nvrbetrwhoohoo3941]

Pure genius. Wish they had an online/distance PhD program.

[@maxr1826]

i think the rhine river example makes it very clear that selling drugs is rent seeking

[@ochanjonathan621]

we have a lot of mud farmers in my country uganda…great lecture

[@chetanasin9150]

Thanks

[@arroxas]

Is lobbying same as rent-seeking?

[@JK-pe4hr]

Very good lecturer

[@JK-pe4hr]

Excellent, in fact.

[@Ariss106]

It is weird listening and hearing that it is difficult to draw boundaries between Patents and Mud Farmers or Patent Trolls. It doesn't appear like it is very difficult for people in Silicon valley to determine which hardware and software is essentially obvious and which is actually innovative. Is it reasonable that the problem isn't drawing boundaries but it is the way that one goes about obtaining patents(or how they are reviewed) and defending them, is actually the system that needs to be changed.

[@nme-bp7cf]

IS METHANPHETAMINE RENT-SEEKING OR PROFIT-SEEKING, PROFESSOR MUNGER I NEED THE ANSWERS WHY DO YOU DO THIS TO ME

[@bozimmerman]

Apple revisionism is exhausting. I wonder if Chevrolet would be credited, instead of Ford's Model-T, with bringing cars to the masses, if Ford Motor Co. had gone under in 1940.

[@mileslilly2]

Are rents always bad?

[@SusanSt.James-33]

No, I don't think so. Rent seeking and rent extraction seem to be the bad stuff that distort and mess up economies.

[@ogimk]

Greed is not taking things from others but to want more and never be enough. Although most of the people do not have the basic things, greedy people have a lot and still want more!

[@danielkaczmarski5688]

Not all greedy people have a lot. For example, some poor people steal things they don’t need. In fact, a lot of poverty is directly caused by the greed of people who do not save the money they need to get things they want.

[@chetanasin9150]

Thanks